Household Loans Increased by 7.6 Trillion Won in January... Demand Remains Strong Despite 'Loan Tightening'

Bank of Korea 'Financial Market Trends in January 2021'

[Image source=Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] Credit loans, which seemed to have slowed down due to the financial authorities and banking sector's 'tightening of household loans,' have increased again. With continued demand for credit loans related to housing and stock transactions, and banks resuming the sale of loan products after tightening loans at the end of the year, the increase in household loans was the largest ever recorded for January.

According to the 'Financial Market Trends for January 2021' announced by the Bank of Korea on the 10th, household loans from banks increased by 7.6 trillion KRW in January. This is the largest increase for January since the Bank of Korea began compiling related statistics in 2004. The increase was twice as large as the previous record of 3.7 trillion KRW in January last year.

Mortgage loans increased by 5 trillion KRW, and other loans increased by 2.6 trillion KRW, both setting record highs for January increases. In the case of mortgage loans, demand for funds related to housing sales and jeonse (long-term lease) continued, maintaining a high growth rate following the previous month.

Other loans, mostly consisting of credit loans, saw a significant expansion in the increase compared to the previous month (400 billion KRW). Although the banking sector tightened credit loans at the end of last year, reducing the loan volume, demand surged again as credit loans resumed at the beginning of the year. It appears that credit loans were mainly taken out for jeonse transactions or stock investments.

Yoon Okja, Deputy Head of the Market General Team at the Bank of Korea's Financial Market Department, explained, "Usually, January is an off-season for housing transactions, and household loans do not increase significantly due to bonuses being paid, but unusually, household loan demand increased significantly in January compared to previous years."

Corporate loans from banks increased by 10 trillion KRW in January. This is the second-largest increase since the start of preliminary reporting in June 2009 for January increases.

Corporate loans increased in both large corporations (3.3 trillion KRW) and small and medium-sized enterprises (6.6 trillion KRW). In particular, SME loans recorded the largest increase ever for January.

Corporate bonds saw net issuance expand to 2.2 trillion KRW compared to 300 billion KRW in the previous month, as investment institutions resumed fund management at the beginning of the year. Commercial paper (CP) also increased its net issuance from 200 billion KRW to 2.3 trillion KRW during the same period.

This content was produced with the assistance of AI translation services.